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Friday, June 09, 2017

Cuba drills for own oil as Venezuelan flow falters

The "Varadero 1,008" drill in the village of Boca de Camarioca is part
of a plan by Cuba to make up for lost oil imports from Venezuela by
boosting its domestic supply
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Near the Cuban seaside village of Boca de Camarioca, a giant drill runs
into the ground and out to sea, probing for oil.

Cuba once got most of its oil cheap from its socialist ally Venezuela,
largely paid for by exporting medical staff and supplies -- but economic
crisis in Venezuela has stemmed the flow of crude.

That has caused "instability" of supplies on the communist island, says
Roberto Suarez, joint director of the state oil monopoly Cuba Petroleo
(CUPET).

"We are making every effort to explore and identify zones that might
produce oil."

The island is being forced to look for alternatives at home as analysts
warn that, without Venezuela, there are few available abroad.

- Urgent search -

Cut-price oil from Venezuela helped rescue Cuba from the downturn it
suffered in the 1990s after the collapse of the Soviet Union, its most
powerful patron.

But Venezuela's oil exports have plunged by 40 percent since 2014,
according to independent analysts.

Cuban authorities have been regularly resorting to energy rationing
since last year.

Cuba consumes 130,000 barrels of oil a day but only produces 50,000
itself, estimates Jorge Pinon, a former oil executive and now an analyst
at the University of Texas at Austin.

Venezuela for years supplied more than 100,000 barrels of crude a day to
Cuba, which refined and exported the excess.

But that industry has declined too. UN statistics body Uncomtrade says
output at the key Cienfuegos refinery plunged from $500 million in 2013
to $15.4 million last year.

A total halt to Venezuelan oil imports would cost Cuba $1.5 billion a
year, Pinon estimates -- a further blow to its already grim finances
after it entered recession last year.

- Billions of barrels -

Dressed in orange overalls, engineer Geisel Escalona supervises the work
of the 58-meter (190-foot) drill, rented from the Chinese company Great
Wall.

CUPET hopes to drill a well dubbed "Varadero 1,008" to tap part of a
reserve which it estimates to hold 11 billion barrels of oil.

In the best case scenario for Havana, that would turn Cuba into a
well-funded small power overnight -- able to project the Americas' only
Communist regime years into the future.

But for now, there is no breakthrough.

The company's on-shore oil platforms have run dry and attempts to drill
in the Gulf of Mexico have been fruitless.

Now, it is using a technique known as "horizontal drilling" in this
village east of Havana, probing for possible off-shore oilfields with a
drill that slants underground from an on-shore location.

"We have reached down to 1,350 meters... and we hope to get down to
8,200 meters," Escalona said.

CUPET already has nine other wells drilled in the broader Varadero zone.
Between them they account for more than 98 percent of Cuba's home oil
production, Suarez said.

- Lifeline from Russia? -

Cuba also appears to be reaching out beyond its shores -- it received
249,000 barrels of crude from Russian state oil firm Rosneft in May.

That was part of a deal for 1.8 million barrels signed in March with a
Cuban state metal company. Full terms of the deal were not made public.

Pinon interpreted it as "a test for a lifeline while they wait for
Venezuela's political and economic collapse."

However he judged that under the current political conditions, it was
unlikely Moscow would return to supporting Cuba to the extent it did
during the Cold War.

Other traditional allies such as Algeria and Iran, he said, also appear
economically unable to do much to help Cuba at the moment.

"I know of no other country that has the financial strength, the level
of oil production and the political alignment with Cuba which could
replace Venezuela without it having an impact on the Cuban economy,"
said Pinon.